Slowing inflation In India
The Reserve Bank of India raised the repo rate, or the rate at which banks borrow from the central bank, by a significant 50 basis points to 4.9 percent on Wednesday. The move is part of the RBI’s reversal of accommodative policies aimed at stimulating growth. Nonetheless, the central bank maintained its 7.2 percent growth target.?
To keep inflation under control, India will need to make a “growth sacrifice,” according to a JPMorgan economist on Thursday.?
Inflation has been rising, forcing the central bank to raise interest rates faster and more aggressively than previously anticipated. In April, rising food and fuel prices drove retail inflation in India to an eight-year high of 7.79 percent.
“The upside risks to inflation have materialised earlier than expected, both in terms of timing and magnitude,” RBI Governor Shaktikanta Das said on Wednesday, indicating that the central bank will likely continue to unwind accommodative policies.?
Since the RBI cut rates by 75 basis points during the pandemic, the central bank has room to raise rates by another 25 basis points following Wednesday’s decision. However, things would become more difficult from that point forward.?